How long should I expect a series A fundraising round to take?

Description

Ben Narasin, Partner at Canvas Ventures explains the time it takes to raise a funding round as well as the importance to strategize and think ahead on how it will impact future funding rounds.

Video transcript:

How long should I expect a series A fundraising round to take?

I think of a typical series A used to be 12 to 18 months. These days you might want to be more conservative and go with 18 to 24 months. It’s not here to eternity, you know, the typical reality of the kind of high-growth businesses a venture is going to fund are such that they are spending that money to invest ahead. Therefore we know they’re growing their sales team. The sales team is grown before the revenue from the sales team kicks in, right, so as long as that is a long-term profitable thing to do, it’s not a problem at all with investing ahead.

When you do that, you tend to have a negative cash flow. You can grow like this, growing like this is very expensive. And unless you’re just operating with sickening margins at a ridiculously low-cost base, it’s highly likely you are burning cash while you’re doing it. So have you raise for too long, let’s say you went out and tried to raise money the last two to four year. There’s a couple of issues with that; one, you’re giving up a lot of the company for that. That’s pretty meaningful dilution, the more you raise, the more of the company you give up, in theory.

The other is that it is really not how venture is optimized, you need to get from home plate to base one, from base one to base two, each of those is relevant funding rounds. I’ll comment that every round is about the next round. When you raise a series A round, part of that is about figuring out things you have to achieve with that capital, which will then trigger the next round. Is not that you’re only thinking about fundraising, but unless you have a business that truly goes well, and it’s profitable and it does not have any limits in growth at all, which I’m not sure I’ve ever met. Then you know, you’re going to assume that you’ll raise money, and raise money again, and raise money again, on a journey to a public company, a free-standing company, or some really meaningful acquisition if that is the option that comes about. I think that most entrepreneurs that I find most compelling want to have free-standing world-changing businesses that can run for decades into the future.